Summary Unit 1 Introduction to Business - IB Business Management
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Course
Institution
Senior / 12th Grade
Book
Business and Management
According to the new Business Management textbook (Paul Hoang's IB Business Management 5th Edition), from the cohort M2024 onwards.
These summary notes cover:
- Topic 1.1: What is a Business?
- Topic 1.2: Types of Business Entities
- Topic 1.3: Organisational Objectives
- Topic 1.4: Stakeho...
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1.1 Introduction to Business
The nature of business
A business either:
Produces goods - tangible, physical products
Provides services - intangible products
Resources (inputs) used (land, labour, capital, enterprise):
Physical resources- raw material/ semi-finished goods a business may need to
start production
Financial resources- funds needed to start and keep the business running
Human resources- people needed to run the business
Entrepreneur: the individual who plans, organises and manages a business and its
operations, taking on financial risks in doing so.
Traits of an entrepreneur: creative, innovative and highly passionate
Nature of a business is to generate added value- products are appealing to
customers, create customers- satisfy the wants and needs of people.
Needs: basic necessities
Wants: people’s desires
Customers: people or organisations that purchase a product
Consumers: people or organisations that actually use the product
Consumer goods: products sold to the general public (B2C)
Capital/producer goods: goods bought by other businesses to produce other goods
(B2B)
Functional areas of a business:
1. Human Resource Management: responsible for managing the personnel of the
organisation (recruit, induct and train employees)
1.1 Introduction to Business 1
, 2. Finance and Accounts: responsible for managing the organisation’s money,
ensuring compliance with legal requirements and informing those interested in
the financial position of the business.
3. Marketing: responsible for identifying and satisfying the needs and wants of a
customer, ensuring that the company’s product sells.
4. Operations management: responsible for the process of converting raw materials
into finished goods, ensure that services are delivered at the lowest cost possible
given the standards of quality expected by customers.
Primary, Secondary, Tertiary and
Quaternary Sectors
Categories based on the stage of production:
Primary Sector: Involved with extracting, harvesting and converting natural
resources. Eg: agriculture, fishing, mining, forestry and oil extraction. Large
percentage of output and employment in low-income countries. Has very little
added value.
Secondary Sector: Involved in manufacturing or construction. Eg: clothes
manufacturers, publishing firms, construction firms, electronic manufacturers.
Output is sold to other businesses, governments, etc. Value is added to the
natural resources.
Tertiary Sector: Provide services to the general population and other
organisations. Eg: retailing, banking, insurance, healthcare, entertainment.
Dominant in high-income countries.
Quaternary Sector: Involved in intellectual and knowledge-based activities that
generate and share information. Eg: research, consultancy services, ICT. Sub-
category of tertiary.
Chain of production: Primary production —> Manufacturing —> Services (tertiary and
quaternary output) —> Consumers
Challenges and opportunities for starting a
business
Challenges:
1.1 Introduction to Business 2
, 1. Lack of finance: Finance for purchasing fixed assets (premises, buildings,
machinery and equipment). Entrepreneurs receive insufficient funds or high
interest rates.
2. Unestablished customer base
3. Cash flow problems
4. Marketing problems: arise when businesses fail to meet customer needs,
resulting in poor sales and no or very little profit.
5. People management problems: lack experience in hiring the right staff.
6. Production problems: overproduction - stockpiling, wastage and increased cost;
underproduction - dissatisfied customers, loss of potential sales
7. Legalities: paperwork / legal requirements are confusing, time consuming and
expensive
8. High production cost
9. Poor location: busy areas have more customers but are expensive.
10. External influences: a global financial crisis or an outbreak of a pandemic can
cause problems.
Potential opportunities (GET CASH):
1. Capital Growth- their business has value, property and land increases over time
2. Earnings- entrepreneurs might earn far more than salaries from any other job.
3. Transference and inheritance- entrepreneurs can pass their businesses to their
children to give them financial security.
4. Challenge- some people start a business because they want to challenge
themselves. It satisfies them and makes them perform better.
5. Autonomy- working for someone else doesn't give people the independence,
freedom, choice and flexibility that they might want.
6. Security- Greater job security and financial security
7. Hobbies- some people turn their hobbies and interests into a business.
Definitions
1.1 Introduction to Business 3
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